International suitors line up for stake buy in Llyod Electric's consumer durable arm

NEW DELHI: Delhi based heating,ventilation and air conditioning systems maker Lloyd Electric & Engineering has initiated the process of carving out its fast-growing consumer durable segment and inducting a strategic or private equity investor and unlock value , multiple sources familiar with ongoing negotiations told ET NOW on the condition of anonymity.

"The company had indicated earlier in the year that it would explore various strategic and financial alternatives to enhance shareholder value and this move is part of that plan. Currently, they are exploring options to either sell a significant minority stake or a majority stake depending on the progress of the discussions. The deal will boost the carved out consumer durable segment with the potential addition of new products, brands and technology and will also help to deleverage the balance sheet of Lloyd Electric & Engineering ," said one of the sources cited above.

Lloyd Electric & Engineering had a debt of Rs 879 crores as of FY 2015-16. It ranks amongst the top 3-4 players in the room a/c segment and has a market share of 14%. The LED TV segment also saw an increase in market share in the first quarter. The Q1 net revenues of the consumer durable segment grew by 43% YoY and stood at Rs 628 crores.

" Multiple international majors, including Japanese and Chinese suitors have expressed interest. Due diligence is currently underway and the expected enterprise value of this proposed transaction could be between Rs 1800 to Rs 2000 crores," added a second source.

In response to an e-mail query from ET NOW on the demerger and the consequent stake sale, Lloyd Electric & Engineering responded saying, "We do not comment on market rumours." The company is looking to enhance its market position in the global rail and defence HVAC ( heating, ventilation and air conditioning) systems business and had announced the acquisition of Noske-Kaeser's rail and vehicles business earlier this year in March.

Last year, Crompton Greaves had sold a 34% stake in its demerged consumer products business to Advent and Temasek for around Rs 2000 crores. Recently, CK Birla Group firm Orient Paper announced the demerger of its consumer electrics division.